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Markets & EconomyGlossary

Bear market

A bear market is a fall of 20% or more in a broad market index, usually over at least two months. Plain-English definition, an example and related terms.

Also called: bear, bearish market

By The Token Thesis Desk2 min read4 cited sources

A brown bear running across grass
“Brown bear (Ursus arctos arctos) running” by Malene Thyssen — CC BY 2.5 (edited: cropped, recolored)

Quick answer

A bear market is a period when stock prices are falling and investors are pessimistic. Generally, it means a broad market index has fallen 20% or more from its high over at least a two-month period.

What does bear market mean?#

The SEC's Investor.gov glossary describes a bear market as a time when stock prices are declining and market sentiment is pessimistic, and says it generally occurs when a broad market index falls by 20% or more over at least a two-month period[1]. A broad market index is a single number that tracks a large group of stocks; see stock market indexes explained.

FINRA uses the same 20 percent line and notes that the term can also describe a stock or bond index, or a commodity's price, that falls and keeps falling[2]. A smaller fall of at least 10 percent that then reverses is called a correction[2]. The opposite of a bear market is a bull market.

What does a bear market look like in numbers?#

Worked example

An index falls from 4,800 to 3,840

Suppose a broad index peaks at 4,800 and later closes at 3,840 (illustrative levels, not real data). The fall is 20.00%, which crosses the usual bear-market line. To get back to 4,800 from 3,840, the index would need to rise 25.00% — losses and gains are measured from different starting points.

StepIndex levelChange
Peak4,800—
Low point3,840−20.00% from the peak
Back to the old peak4,800+25.00% from the low

Figures computed in code from the stated inputs; rounded to the nearest cent or tenth.

Why does the term matter to a beginner?#

Falls are part of owning stocks. Investor.gov notes that large company stocks as a group have lost money on average about one out of every three years[3]. A bear market is simply a bigger, longer fall than usual, and the label is only applied after the 20% drop has happened.

That timing is why the label is not a trading signal. FINRA's advice for turbulent markets is to avoid impulsive decisions when markets become volatile[4]. For the full comparison with bull markets and corrections, read bull vs bear markets; for how falls are measured from a peak, see volatility and drawdowns.

Sources

Numbers in brackets in the text point here. Grade A = primary source (regulator, statistics agency, law or official document).

  1. 1
    Bear Market (glossary)U.S. SEC — Investor.gov (n.d.) · Grade A
  2. 2
  3. 3
    What is Risk?U.S. SEC — Investor.gov (n.d.) · Grade A
  4. 4

How we checked this note

Every number, date and rule above links to its source. This note cites 4 sources, 4 of them primary (Grade A). Worked examples were calculated in code, and a second editor compared each figure with its source before publishing. Spotted an error? Tell us — corrections are listed on the note. Read our editorial policy.